TheMReport — News and strategies for the evolving mortgage marketplace.
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18 | Th e M Rep o RT Feature declined from 54 percent of all sales in March 2009 to 28 per- cent in February 2014. Knowledge may help to ease their fears. Once potential homebuyers understand what is involved in creating a credit score and how different actions affect both their score and their ability to qualify for credit, they are in a better position to begin to make smart decisions that may improve their creditworthiness. To be clear, this isn't about quick-fix credit repair—it's about teaching consumers how to responsibly manage money and debts, and how to make a conscious effort to change their behavior over both the short- and the long-term so they maintain a good credit history. Mortgage pro- fessionals are in a unique position to steer declined and "not-quite- ready" applicants in the direction of the help they need. There are several reputable companies that offer Web-based financial and credit management education for consumers. Some of the sites provide these services for free, while others charge a small monthly fee that is paid by either the applicant or the mortgage professional. These online services use a score simulator to analyze con- sumers' spending and payment history, demonstrate how various actions may affect their credit, and provide personalized debt and spending management guidance. All also provide regular credit re- ports and credit scores to enrollees so they can track their progress. Some of the sites provide daily credit monitoring and notify consumers if significant changes occur in their credit report. Some offer identity theft protection and assist with fraud resolution if identity theft occurs. One even provides a lender portal with an online dashboard so lenders can keep track of enrolled consumers, with their permission. The portal automatically notifies lenders when customers reach a target threshold that the lender has set, thereby helping lenders know when to get back in touch. The bottom line is, credit management sites give lenders the opportunity to help consumers become more creditworthy and, thus, move forward with their dreams of homeownership. Credit Education Pays Off for Lenders O ver the past five years, it has become clear that many consumers need help under- standing how to better manage their credit and improve their credit history—and they are grateful when a lender steps in to help by recommending credit management education. "We want people to know that just because they were denied a mortgage loan doesn't mean we can't work with them to achieve homeownership," said Karissa Stiglic, social media/marketing coordinator at Gateway Funding Diversified Mortgage. That sentiment is echoed by Mortgage Investors Group in Knoxville, Tennessee, where credit management is seen as a cornerstone of responsible lend- ing. "Instead of credit repair, we recommend a program that focuses on improving and shaping credit behavior. We pay the fee for the borrower for six months, as long as they come back to us to close," said Jesse Lehn, EVP of operations. "Many applicants don't under- stand what impacts their credit score," he continued. "Credit is misunderstood, especially among young people fresh out of college or high school. As first-time home- buyers, they typically don't have a credit history and don't have the experience to understand credit score cause and effect. We use this avenue to direct borrowers who aren't able to qualify and need a path to better credit management." The company approves loans with a credit score as low as 620 if there is no other risk, but really prefers scores above 640. It denies 5 to 10 percent of loan applications due to credit. Over at Aspire Financial, Inc. (dba TexasLending.com), the team tries to help as many people as they can regardless of their credit situation, whether they are pre- or post-application. "We see many people who are looking for help with their credit before they even begin the application process. In our experience, many people are unaware of how credit works and how their behavior affects their credit," said Goni Karamuco, corporate lead manager at Aspire. "Currently, we have 200 to 300 people enrolled in various stages of an online credit education and management program." Credit Management Programs Can Feed Your Pipeline T here's an old saying: "Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime." Credit management teaches consumers what they need to know in order to make their credit work for them instead of against them. Credit education sites can help potential homebuy- ers get into financial shape so they can get into the home they want. And, as they're learning what they need to know, the pipeline will be consistently filled with qualified leads. JiM Ryan is president of iQualifier, a service of Credit Plus Inc. iQualifier is a revolutionary online program that features technology from CE Analytics and teaches consumers smart credit management. He can be reached at getsmart@iqualifier.com. mailto:beyondbundled@creditplus.com. GReG HolMes is national director of sales and marketing at Credit Plus Inc., a third-party verifications company serving the mortgage industry. He can be reached at info@creditplus.com. 3MReport.indd Americans Don't Understand Credit Scores Fear and misinformation are keeping potential homeowners out of the market. 46 % of Americans are afraid that they won't qualify for a home loan. of that group . . . 73 % didn't even bother. 27 % actually took steps to see if they would qualify. 50 % 18 % didn't know the minimum score they needed to qualify for a mortgage. thought they needed a score of 680 to 770 or higher.